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Bernanke - Spend More, I'll Buy The Bonds!

Bruce Krasting's picture




 

 

I think Bernanke broke the "rules" today. He was very clear in making recommendations about what Congress should do with the sequestration. Ben's very public position comes three days before cuts are due to hit. I've not seen a Fed head do this before; we'll see if the Chairman's words alter the outcome.

For sure, he has thrown his (and the entire Fed's) hat in this ring. He is taking the side of the Administration. For that he is going to take political heat. He deserves the heat - Ben's meddling where he shouldn't.

 

I heard Ben say, "Buy gold and short bonds".

 

Broke

 

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Tue, 02/26/2013 - 17:56 | 3279386 Praetorian Guard
Praetorian Guard's picture

The Feds algo:

do{ cout << "Print FRN's? " << endl; FRNs = 0; FRNs++;}while(FRNs > 0);

Tue, 02/26/2013 - 17:17 | 3279210 caShOnlY
caShOnlY's picture

I heard Ben say, "Buy gold and short bonds".

  ..... Bruce, are you really just waking up????  you surprise me with me all the good investigative info you bring from the gov numbers I would have expected you to be on board the gold wagon after QE 2.   Did you just realize Ben can never stop printing and the gov will never stop spending.   They are going to "blow the dollar"...... it is guaranteed.

Tue, 02/26/2013 - 16:41 | 3279009 Widowmaker
Widowmaker's picture

For fuck's sake, Krasting.  This is where Bernanke crossed the line?

He decimated the rule of law, lost the confidence of a generation, and we haven't even begun to see the damage he has inflicted; and you think smiling at Congress is bad?

Wow....

Tue, 02/26/2013 - 16:10 | 3278858 Fix It Again Timmy
Fix It Again Timmy's picture

The pyramid symbolizes the genius of the Pharohs who invented religion as a way to control the masses.  There is no copyright on control, you just substitue other entities than religion and you are on top...Clever people in successive generations have implemented this strategy.  The only known antidote for this mind control is true KNOWLEDGE, something that is NOT dispensed with the MSM...

Tue, 02/26/2013 - 16:04 | 3278830 HoofHearted
HoofHearted's picture

I heard the Bernank say to buy gold and short bonds back five years ago. So I did. And I've slept better since...

Tue, 02/26/2013 - 15:56 | 3278790 Nid
Nid's picture

I can't believe people actually voted for Bernanke in the first place...

Tue, 02/26/2013 - 15:35 | 3278666 walküre
walküre's picture

The elite (banks) should have never been bailed out. That action changed the path and the course of financial history. It cannot be undone, the short term gain it created is now our collective long term pain.

Tue, 02/26/2013 - 16:12 | 3278875 silverserfer
silverserfer's picture

the eliete's banks were infused with money to preserve their power this is what QE is for nothing more. the term "bailout" is an illusion for sheep. they will print as losg as they have  the power to do so now as we as fools continue to accept their worthless paper.

Tue, 02/26/2013 - 15:25 | 3278631 Fix It Again Timmy
Fix It Again Timmy's picture

As long as Bennie can continue to make Americans believe that dollars [frogskins, as Indians call them] are money, they will be able to do ANYthing they [TPTB] want...  As Ted Nugent says, "It's that Fucking simple..."

Tue, 02/26/2013 - 17:27 | 3279264 orez65
orez65's picture

It is truly God damn fucking unbelievable that Americans don't understand the difference between MONEY and a NOTE!!

Even, or specially, the educated ones!!!!!

They are the fucking "walking dead"

Tue, 02/26/2013 - 15:47 | 3278732 walküre
walküre's picture

When you really think about it and take a good look at that paper with the pyramid and the eye on top, you cannot help but conclude that we are truly in the Twilight Zone. Just the design of the paper gives it away. I'm open to many conspiracies but haven't had much time to think about he alien stuff. But when you look at that paper and the pyramid with an eye on top.. and that paper is circulated world wide and is used as a medium of exchange for goods and services in this 21st century where we send spaceships into outer orbit and we can take tumors from a brain, you really have to wonder what the fuck is going on. It's gotta be the Twilight Zone or something close to it. Grown men and women from all walks of life and with varying degrees of higher education and intellect are bowing to a system that is built around the paper money which pictures a pyramid and an eye on top of it. That is the norm. That is reality. What kind of a reality is this? Whose reality is this? Who created this and why have people not tried to abandon this shit? The levels of control to keep the people complacent and obedient must be HUGE!

Tue, 02/26/2013 - 16:56 | 3279097 shovelhead
shovelhead's picture

The reality is that it works until the first person to receive those creepy eyeball pyramids says:

Nah...What else you got? Any REAL money?

Tue, 02/26/2013 - 15:14 | 3278587 Ban KKiller
Ban KKiller's picture

Ben was telling not suggesting, he was telling Congress what to do. The stooges will comply as their portfolios are weighted heavily in bank stocks, yes? 

Tue, 02/26/2013 - 15:11 | 3278570 steve from virginia
steve from virginia's picture

 

 

 

The problem isn't Bernanke, it's a tightly coupled system that requires the status quo to be maintained at all times ... at whatever cost.

 

Status quo: deficit states as deficit states and surplus states as surplus states. Uh-oh. The establishment has been fixated on banks and interbank lending costs, they've ignored Forex ... OH SHIT (said the boiler tenders on the Titanic)!

 

Trade imbalances have gone Galt, what is taking place in Japan ... and it's new trade deficit ... means Japan cannot borrow from its customers any more. Is this a problem? It is THE problem: currency traders and hedgers in a panic, F/X markets are instantly non-linear.

 

Not only: the F/X markets are non-linear and nobody -- even forex traders -- can understand why ... too complex!

 

In 2007 it was mortgage originators and monolines. It's different this time: history rhymes! There is super stress on overseas flows, there is a shortage of ready-reserve cash. Nobody wants credit, it is perceived to be mispriced (because of Bernanke and other central bankers). The establishment has outwitted itself!

 

People are about to find out how expensive cash can be ... and very soon.

 

 

Tue, 02/26/2013 - 16:03 | 3278823 Orly
Orly's picture

"Not only: the F/X markets are non-linear and nobody -- even forex traders -- can understand why ... too complex!"

Too many moving parts.  Too many mouthpieces.  Too much jawboning of an ass.  Central bankers don't even understand what's going on half the time, I would say.  Hildebrandt found out pretty quick (but his wife made a bundle!)

Why anyone would think that Japan is going to bring in an international banker to try to resolve their currency problem and all will be right with the world as soon as he steps into the seat is a mystery to me.

What does China really plan to do with all that gold?

Is an implosion in the Canadian housing market imminent?  What about the one in Australia?

Walking on a knife's edge and the central bankers are just as cool as cucumbers.  There's something fundamentally wrong about that.  I just want one of them to go all Howard Beale on us one day and shout from the window, "I'm mad as hell and I'm not going to take this any more!"

Then, maybe we can all figure out just what in the wide, wide world o'sports is-a goin' on around here.

:D

Tue, 02/26/2013 - 16:08 | 3278849 jomama
jomama's picture

What does China really plan to do with all that gold?

 

gee, i dunno, use something other than debt promises to back their currency?  crazy notion, i know.

Tue, 02/26/2013 - 16:15 | 3278885 Orly
Orly's picture

It is quite possible.

Think about a regional pact wherein Pacific nations throw in a certain amount of gold, silver, palladium, what have you.  Instead of a renmimbi, we have something like a Pacific Won that represents the economies of VietNam, Laos, Cambodia, Myanmar, Indonesia, etc.  Something like a Euro but not backed by government promises.

Imagine what would happen in those nascent economies for the next hundred years (or until they figure out that they can just make paper promises like everyone else...)

That'll throw the monkey in the wrench.

:/

Tue, 02/26/2013 - 15:11 | 3278567 kaiserhoff
kaiserhoff's picture

Good point, Bruce.

Desperation is never pretty.

Tue, 02/26/2013 - 15:09 | 3278559 Wanton1
Wanton1's picture

Germany had a Central Bank

Until Hitler said it didn't.

 

All Obama need do is press the button.

 

PLove

Tue, 02/26/2013 - 14:54 | 3278497 ebworthen
ebworthen's picture

Bernanke is taking a position because he is a lackey of the bankers.

More government spending and QE to the moon so the banks and corporations can continue raping the middle class.

If he really cared about the debt and his fellow citizens he would advocate ending the FED and no bailouts for failed banks, insurers, corporations.

Tue, 02/26/2013 - 14:40 | 3278449 geno-econ
geno-econ's picture

Congress gave the Fed reason to meddle in economic policy when they made it the Fed's responsibility to consider  unemployment rate in their decisions.  We really do not need a President nor Congress for that matter.  We are stuck with deficits since Congress will not meaningfully  cut spending and the President will not exercise any sound economic policy.  So the bankers just milk the system by getting continuous bailouts and Bernanke just  talks of saving a failed system.  Wall St also flourishes because there is no other place to park all the liquidity floating around--- until the next meltdown or Swan sure to appear on the horizon. Oh yes there is also precious metals that reflect weakness in our  currency and speculating in FX, but real investment is imaginary at best

Tue, 02/26/2013 - 14:20 | 3278367 WhiteNight123129
WhiteNight123129's picture

The US gov is not borrowing. The bonds will never get unwound, there is will never be a shrinkage backwards.

The US gov is simply injecting new base money. For the US gov to really borrow it would need to be repaid (that is the principles of borrowing) and the money would need to come from existing deposit base (hence the difference between Japan in the last 15 years up until recently). THe Japanese gov was really borrowing, that is getting new bonds boughy by existing deposits.

Today the US gov has frozen the debt increase since 2009 because all those bonds on the Fed will never unwind in a way that will shrink the monetary base backwards. What is going on is hte US Gov getting out of thin air new dollar bills and spending them in order to plug a hole. If the US gov was not doing that teh prices would have plunged by 30% it would have been an utter disaster.

Once the newly printed base money gets momentum, the Fed will have to raise rates agressively, and we willl be stuck with yeaaars of bear market and nasty sticky inflation. (That is the cost to avoid a total collapse).

When computing the US debt to GDP substract all the stuff on teh Fed balance sheet. It will never unwind ever. It will mature but the monetary base will not shrink backwards overall.

HOw is US gov injecting new base money?

US Gov sells bond to PIMCo and receive deposit. PIMCO sells bond to Fed and receives newly created base money.

Cancel PIMCO in the middle and you get US Gov sells Treasuries to FEd and REceives new base money and injects that in the eocnomy.

It is not a loan because the balance sheet of the Fed and monetary base will never shrink backwards. For the rest of us, credit is redeemable in money and there is a sucking effect on money when teh debt is due. Not with the Gov, the Gov has access to newly printed dollar bills with no strings attached. The fixed annuities policy holders will pay the bill for that.

 

 

Tue, 02/26/2013 - 15:11 | 3278565 walküre
walküre's picture

Agreed that they need to create more inflation. So that in 10 years when we hit 30 trillion in debt, the 16 trillion number of 2012 doesn't sound so bad anymore. They can raise rates but they can also take a shit in the woods. Nobody will either notice or care anymore.

Try servicing or rolling over any private, corporate or public debts when the Fed increases base to 2% (up 200 pts) or higher. Impossible because the economy shrinks relative with every percentage point increase.

Unless they unwind (which they can't) or cut debt (a.k.a. as default which they can't) they can't raise rates. The elite will be told to sit tight because they were made whole with bailouts. They can ask for more but they won't get to keep their cake and eat it too or millions will knock down the gates to their hide-outs in the Hamptons and other dizzy ghettos. The fun part is that the elite likes to hide away in plain sight and all in the same somewhat remoter areas which makes it so much easier to cut them off. I'm not making this stuff up. They didn't learn anything from the French Revolution and the court of Versailles. It was easy for the French people to go after the elite because they were all in the same spot.

Tue, 02/26/2013 - 19:46 | 3279789 WhiteNight123129
WhiteNight123129's picture

Nope, the ~beauty~ of inflate away scam is that at some point enough base money is injecting in the system so that price rise on their own, price of everything rise actually. At that point you have an inflationary recovery because you have redundant base money fianlly getting to work. The Gov can let the price keep going higher without injecting more base money. And the true debt contracted prior to 2009 from existing deposits, that is the debt prior to the ~faux~ debt increase which is sitting on Fed balance sheet which will never be repaid, will shrink in % to nominal GDP.

In simpler terms, prior to 2009 the Gov needs deposits to buy the debt. After 2009, the gov gets newly green bills, spends them. Prices go higher including nominal GDP, the guys holding the debt prior to 2009 get diluted in % of nominal GDP.

DELEVERAGING DONE. MISSION ACCOMPLISHED.

 

 

 

Tue, 02/26/2013 - 17:46 | 3279347 willwork4food
willwork4food's picture

I'm ready when you are. Baby needs new shoes..

Tue, 02/26/2013 - 14:47 | 3278468 g speed
g speed's picture

Your saying if I get an extention cord and plug one end into the other I will have a constant supply of electricity and then if I plug a tool into the extra receptical on the extention cord I can operate that tool forever--  thats what your saying.

Tue, 02/26/2013 - 16:44 | 3279027 WhiteNight123129
WhiteNight123129's picture

Nope, I am saying that teh Gov borrowing is a scam, and not borrowing in reality, just the same as US gov during civil war. Get a printing press print green bills and spend. The debt on the Balance sheet of the Fed is disguising the reality that it is not really debt. Everyone else has to repay its debt, but not teh Gov when the debt is on the balance sheet of the Fed. The Gov calls that ~base money~. Noone will ever force the Fed not to agree to roll-over teh bonds on the Balance sheet. If the debt is roll-over for ever it not debt, merely going to the closest printing press, print some dollars, give them to teh Gov, the Gov spends. Period. The ~Borrowing from teh Fed~ is not borrowing at all.

Tue, 02/26/2013 - 17:38 | 3279304 Meremortal
Meremortal's picture

Or you could say Ben is borrowing from all dollars holders as he devalues our dollars to prop up the fiscal framework.

It's kind of like diluting a stock by creating and selling new shares to pay the company's bills. The holders of old shares lose money through the dilution, which lowers the value of their shares.

 

Tue, 02/26/2013 - 18:13 | 3279487 Thisson
Thisson's picture

It's not borrowing when you take something, give nothing in return, and don't intend to ever give anything.  The word you're looking for is "STEALING"

Tue, 02/26/2013 - 19:13 | 3279680 WhiteNight123129
WhiteNight123129's picture

Absolutely correct. It is stealing from those who have to work to get those dollars and from those who have fixed annuities policy.

HENCE BUY AIG.

Tue, 02/26/2013 - 16:19 | 3278898 jomama
jomama's picture

his saying what?

Tue, 02/26/2013 - 15:52 | 3278760 Orly
Orly's picture

It's Schroedinger's electricity, silly.  The electrcity is real enough but you can never un-plug it to put it to use.  Once the ends are disconnected, the current stops.

Tue, 02/26/2013 - 15:44 | 3278716 dontgoforit
dontgoforit's picture

Perpetual money.  There we go.  Learn to eat dirt; it's gonna be a useful skill.

Tue, 02/26/2013 - 14:05 | 3278335 Sach Mahoney
Sach Mahoney's picture

"Buy Gold, short bonds"  agree with both strategies, but believe that the timing for bonds is still too early.  Flight to quality, errrr, perceived quality, will continue as the credit pandemic sets in and expands.  As bonds rally in the nascent stages of this phenomenom, we'll start witneesssing participants fading rallies in U.S. Rates...particularly as EU rates soar.  That's when you want to get short bonds, when more participants feel less safe in U.S. assets, arguably more at risk, because when they start exiting U.S. Dollar exposure i.e. world reserve currency (rates), its going to be like nothing we've seen in the U.S. before. Patience.  

Tue, 02/26/2013 - 17:42 | 3279327 nightshiftsucks
nightshiftsucks's picture

Where will all of the bond money go ? Stocks or straight to PM's ? What would the value of the dollar be ?

Tue, 02/26/2013 - 14:10 | 3278351 WhiteNight123129
WhiteNight123129's picture

The last gasp of Rally of US bonds is when there is more problem in teh EUROZONE.

Once the ECB prints for good measure, game over for the safe heaven rally in US bonds.

 

Tue, 02/26/2013 - 15:14 | 3278586 disabledvet
disabledvet's picture

I want to say what you're saying is true...but you don't honestly believe with 30 percent unemployment and debt going through the roof "the solution is to abandon the LTRO" do you? And the same is true of the Fed is it not? "anchoring Europe's LTRO is the Fed's LSAP" yes? I don't see the inflation...I do understand the lack of growth, why folks do want to own gold, etc. I do agree HD stock is screaming "inflation" and there was a huge housing print today...but I'm still not convinced this correction...if it becomes one....is over...and simply put "that just puts more pressure on the authorities to monetize."

Tue, 02/26/2013 - 17:39 | 3279315 nightshiftsucks
nightshiftsucks's picture

There was a huge seasonally adjusted print that Tyler debunked.

Tue, 02/26/2013 - 14:00 | 3278314 Downtoolong
Downtoolong's picture

It’s funny how after the Fed runs its numerous complex stochastic, multivariate, statistical models bounded by the targets it has set for interest rates, inflation, and unemployment, the right amount of QE (phony funny money) to inject into the economy (aka the stock market), primarily for the benefit of the banking industry and the uber wealthy just so happens to equal the federal spending deficit.

What an amazing coincidence (aka a seven standard deviation probability event)

Tue, 02/26/2013 - 19:23 | 3279715 WhiteNight123129
WhiteNight123129's picture

All of those models are BS lipstick on a pig. The reality is far more simple. Get a printing press, print green bills, give to Gov. Gov spends, et voila. The models is to make the things look scientific and well constructed.

 

Tue, 02/26/2013 - 15:46 | 3278723 dontgoforit
dontgoforit's picture

and the sum of the parts is greater than the hole of the universe...Fed style, baby. 

Tue, 02/26/2013 - 13:55 | 3278291 Aunty Christ
Aunty Christ's picture

Bruce, why would he want to trash his own book?

Tue, 02/26/2013 - 14:04 | 3278331 the grateful un...
the grateful unemployed's picture

its his feeble attempt at jawboning. he panics the markets, members of congress check their personal 401K accounts. their phone rings off the hook; constituents saying little johnnies college fund just blew up, what's he going to do now, ask POTUS for a student loan? guess its time to switch parties. ca-ching, instant compromise. 

Tue, 02/26/2013 - 15:46 | 3278728 dontgoforit
dontgoforit's picture

I'd guess there's a great deal more truth to that than we would want to know.

Tue, 02/26/2013 - 13:53 | 3278283 the grateful un...
the grateful unemployed's picture

government spending correlates pretty nicely with low interest rates. the 70's inflation came after the war in Vietnam ended. most post war economies lag, and the end is in sight in Afghanistan, but more importantly the sequester will lop 7% off DOD. (maybe this is what you hear Bernanke saying)

Tue, 02/26/2013 - 13:50 | 3278272 Lordflin
Lordflin's picture

Where is it, exactly, that Ben should meddle?

Tue, 02/26/2013 - 14:44 | 3278463 Clowns on Acid
Clowns on Acid's picture

Interest rates period. QE is outside of his mandate. The fiscal mess is the responsibility of Congress...oh yeh and MSM.

Tue, 02/26/2013 - 14:23 | 3278406 g speed
g speed's picture

was a mistype --should say "fiddle"

Tue, 02/26/2013 - 15:49 | 3278745 Orly
Orly's picture

Quite clever...

:D

Tue, 02/26/2013 - 13:56 | 3278297 Dadburnitpa
Dadburnitpa's picture

Only inside his own pants.

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